Oil steady as IMF cuts outlook, Michael hits U.S. Gulf

[October 10, 2018]   By Christopher Johnson

LONDON (Reuters) - Oil prices steadied on Wednesday after the IMF lowered its global economic growth forecasts, but markets were supported as Hurricane Michael closed nearly 40 percent of U.S. Gulf of Mexico oil output and U.S. sanctions restricted Iranian exports.

Brent crude <LCOc1> was unchanged at $85.00 a barrel by 1055 GMT after a 1.3 percent gain on Tuesday. U.S. light crude <CLc1> was down 5 cents at $74.91.

"Oil prices have stabilized for the moment - between a real and a metaphorical storm," said Fiona Cincotta, senior market analyst at City Index.

"Hurricane Michael is powering ahead toward the Gulf of Mexico but it now seems likely to miss the main production areas there. On the other hand, Iran sanctions are only weeks away."

The International Monetary Fund cut its global economic growth forecasts for 2018 and 2019 on Tuesday, raising concerns that demand for oil may also slump.

Trade wars and rising import tariffs are taking a toll on commerce, while emerging markets struggle with tighter financial conditions and capital outflows, the IMF said.

But supply concerns are keeping the market on edge.

In the United States, nearly 40 percent of daily crude oil production was lost from offshore U.S. Gulf of Mexico wells on Tuesday because of platform evacuations and shut-ins ahead of Hurricane Michael.

Michael has strengthened into an "extremely dangerous" Category 4 hurricane, according to the latest advisory from the U.S. National Hurricane Center.

A pumpjack is seen at the Sinopec-operated Shengli oil field in Dongying, Shandong province, China January 12, 2017. REUTERS/Chen Aizhu/File Photo

Oil producers evacuated personnel from 75 platforms as the storm made its way through the central Gulf on the way to landfall on Wednesday in Florida.

Companies had turned off daily production of about 670,800 barrels of oil and 726 million cubic feet of natural gas by midday on Tuesday, according to offshore regulator the Bureau of Safety and Environmental Enforcement.

Crude supply is also a concern in the Middle East.

Iran's crude exports fell further in the first week of October as buyers sought alternatives ahead of U.S. sanctions that take effect on Nov. 4, according to tanker data and an industry source.

Several of the world's biggest trading houses expect U.S. sanctions on Iran to keep oil prices high with crude staying above $65 and possibly breaking above $100 in the medium term.

Jeremy Weir, chief executive of Trafigura, told an oil conference in London on Wednesday he would not be surprised to see oil trade over $100 next year.

(Reporting by Christopher Johnson in London and Aaron Sheldrick in Tokyo; editing by Adrian Croft and Jason Neely)

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